First, the risk of legal change.
Mainly refers to the adoption, promulgation, revision and reinterpretation of laws and regulations, which leads to changes in the legality of the project, market demand, product/service charges, validity of contract agreements and other factors, thus bringing damage to the normal construction and operation of the project, and even directly leading to the risk of suspension and failure of the project. PPP projects involve many laws and regulations. In addition, China's PPP project is still in its infancy, and the corresponding laws and regulations are not sound enough, so it is easy to have risks in this respect. For example, a sewage treatment plant in Jiangsu adopted BOT financing mode, which was originally planned to start construction in 2002. However, due to the promulgation of the Notice of General Office of the State Council on Properly Handling Existing Fixed Foreign Investment Return Projects in September 2002, the project company was forced to renegotiate the return on investment with the government. Shanghai Dachang Waterworks and Yan 'an East Road Tunnel also encountered the same problem, both of which were repurchased by the government.
Second, the risk of delay in approval.
It mainly means that the approval procedure of the project is too complicated, takes too long and costs too high, and it is difficult to make necessary commercial adjustments to the nature and scale of the project after approval, which threatens the normal operation of the project. For example, in some industries, there has always been a phenomenon that costs and prices are upside down. After the introduction of foreign capital or private capital after marketization, it is necessary to raise prices to realize the expected income. According to China's "Price Law" and "Government Price Decision Hearing Measures", a hearing system should be established to solicit the opinions of consumers, operators and relevant parties and demonstrate its necessity and feasibility. This complicated process is likely to delay the approval. Taking the urban water industry as an example, the situation that the water price is lower than the cost shows that it is imperative to raise the water price, but the water price reform in various places has met with public resistance and approval delay to varying degrees. For example, in 2003, the Nanjing water price increase plan was not passed at the hearing; The deputies to the Shanghai Municipal People's Congress also put forward a proposal against the rising water price, which delayed the implementation of the water price reform measures in Shanghai. Therefore, foreign water companies have withdrawn from the China market. Remarkably, Thames Water sold its equity in Dachang Waterworks, and Anglo withdrew from Beijing No.10 Waterworks Project.
Third, the risk of political decision-making mistakes/lengthy.
It refers to the project decision-making mistakes and lengthy processes caused by nonstandard decision-making procedures, bureaucratic style, lack of experience and ability in PPP operation, insufficient preparatory work and asymmetric information. For example, due to the limited understanding and knowledge of PPP by local governments, the government's attitude towards the project changes frequently, which leads to a long negotiation time for the project contract. Moreover, the sewage treatment price was signed without the government knowing the market price and related structure, and the price was on the high side. Later, after the government learned about it, it again asked for price reduction through negotiation. In this project, the project company took advantage of the government's knowledge defects and wrong decisions to sign unequal agreements, which delayed the follow-up negotiations and faced the dilemma of lengthy government decisions. Similar problems exist in Dachang Water Plant, Beijing No.10 Water Plant and Lianjiang Sino-French Water Supply Plant.
Fourth, politically oppose risks.
It mainly refers to the risk that the public interest is not protected or damaged for various reasons, which leads to political and even public opposition to the project construction. For example, the water prices of Dachang Waterworks and Beijing No.10 Waterworks have been resisted by the public because they are related to public interests. The government also opposes price increases in order to maintain social stability and public interests.
Verb (abbreviation of verb) government credit risk
Refers to the direct or indirect damage to the project caused by the government's failure or refusal to perform the responsibilities and obligations stipulated in the contract. For example, in the project of Changchun Huijin Sewage Treatment Plant, Huijin Company and Changchun Drainage Company signed the Cooperative Enterprise Contract in March 2000 to establish Changchun Huijin Sewage Treatment Co., Ltd., and in the same year, Changchun Municipal Government formulated the Management Measures for Changchun Huijin Sewage Treatment Franchise. At the end of 2000, the cooperation operation was normal after the project was put into production. However, since the middle of 2002, the drainage company began to default on the sewage treatment fee of the cooperative company, and the Changchun Municipal Government abolished this management method on February 28, 2003. Since March 2003, the drainage company has stopped paying any sewage treatment fees to the cooperative enterprises. After nearly two years of legal disputes, it ended in the repurchase of Changchun municipal government in August 2005.
For example, in Lianjiang Sino-French Water Supply Plant Project, the performance period of the Cooperative Operation Contract of Lianjiang Sino-French Water Supply Co., Ltd. signed by both parties is 30 years. There are several key unreasonable problems in the contract: first, the quantity of water. According to the contract, Lianjiang Water Supply Company will buy no less than 60,000 cubic meters of water every day in the first year when the water plant is put into production, and it will continue to increase in the future. At that time, the consumption of Lianjiang City was about 20,000 cubic meters, and the huge volume difference made it impossible to perform the contract. Second, the issue of water price. According to the contract, the starting water price is 1.25 yuan RMB, and the water price will increase with the increase of price index and bank exchange rate. The average price of water per cubic meter in Lianjiang City is 1.20 yuan, which has not changed since the implementation of 1999 in May. The contract is divorced from reality, which leads to Lianjiang municipal government and water supply company unable to fulfill their contractual obligations, and the water plant is forced to idle. The outcome of the negotiations has not yet been finalized. In addition, there are projects that encounter government credit risks, such as a sewage treatment plant in Jiangsu, sewage treatment in Changchun Huijin, and a power plant in Hunan.
Risk of force majeure of intransitive verbs
Refers to events or situations beyond the control of one party to the contract, which cannot be reasonably prevented before the signing of the contract and cannot be avoided or overcome when the situation occurs, such as natural disasters or accidents, wars, embargoes, etc. For example, a power plant in Hunan was approved by the former State Planning Commission in the mid-1990s, and a multinational energy investment company in the west won the bid. The provincial government where the project is located has signed a franchise agreement with the company, and the project has made good progress in the early stage. However, at this time, some western powers (including the country where the winning company is located) bombed our embassy in Yugoslavia, which seriously and substantially violated our sovereignty. The sudden change of international political situation makes it impossible for bidders to raise funds internationally or domestically. Therefore, the project company finally failed to complete the financing task within the extended financing period. The provincial government withdrew the project according to the concession agreement and confiscated the bid bond of the winning bidder, and then did not re-bid, which led to the complete failure of foreign investors in this project. In the renegotiation of the investment return of a sewage treatment plant project in Jiangsu, the negotiation between the project company and the government was also interrupted because of SARS.
Seven. Financing risk
It refers to the risk caused by unreasonable financing structure, imperfect financial market, financing accessibility and other factors, and its main form is financing difficulty. One of the characteristics of PPP project is that after the winning bidder is selected in the bidding stage, the government and the winning bidder first initialled the concession agreement, and the winning bidder must complete the financing with the initialled concession agreement within the specified financing period before the concession agreement can come into effect. If the developer fails to complete the financing within the given financing period, it will be disqualified and the bid bond will be confiscated. In a power plant project in Hunan, the developer was confiscated the bid bond for failing to complete the financing.
Eight. The risk of insufficient market returns
It means that the income after the operation of the project can not meet the investment recovery or reach the predetermined income. For example, the Tianjin Municipal Government has provided many incentives for the garbage incineration power plant project in Shuang Gang, Tianjin. If the project income is insufficient for some specific reasons, the Tianjin Municipal Government promises to provide subsidies. However, if the amount of subsidy promised by the government is not clearly defined, the project company will bear the risk of insufficient market return. In addition, at the initial stage of the completion of Jingtong Expressway, because the adjacent auxiliary roads are free, the long-term traffic flow of Jingtong Expressway is insufficient, and there is also the risk of insufficient project income. Similar problems exist in Quanzhou Hangzhou Bay Bridge and citong bridge.
Nine. Project uniqueness risk
Refers to the risks arising from the construction or transformation of other projects by the government or other investors, which leads to substantial commercial competition in this project. The emergence of the unique risk of the project will often bring a series of subsequent risks such as market demand change risk, market income risk and credit risk, which will have a great impact on the project. For example, the Hangzhou Bay Bridge project has not started for two years, but the preparations for the Shangyu Guzhu Shaoxing Hangzhou Bay Bridge, which is only about 50 kilometers apart, are stepping up. One of the reasons may be that the local government is dissatisfied with the high return on capital of the bridge, which leads to the project facing unique risks and insufficient income risks. Xinyuan Minjiang Fourth Bridge has a similar experience. The Fuzhou municipal government promised to ensure that all vehicles entering and leaving Fuzhou from the south will pass through the toll station within nine years. If the toll cannot be guaranteed due to special circumstances, the government will contribute to repay the foreign investment and guarantee the annual compensation of 65,438+08%. However, on May 16, 2004, the third phase of Fuzhou Second Ring Road was officially opened to traffic, and a large number of vehicles bypassed the Minjiang Fourth Bridge toll station. The company's income has dropped sharply, and the investment recovery is hopeless. However, the government did not honor its promise to buy back the right to operate, so it had to go to the arbitration tribunal. In this project, investors have encountered the unique risks of the project, as well as the risk of market income shortage and government credit risk. The situation of citong bridge project in Quanzhou, Fujian Province is similar to that of Jingtong Expressway, both of which have unique risks, resulting in insufficient market returns.
Ten, supporting equipment service risk.
Refers to the risks caused by insufficient infrastructure related to the project. In this respect, the Tangxun Lake Sewage Treatment Plant project is a typical case. 200 1, Katie Company built the Tangxun Lake Sewage Treatment Plant project by BOT, with a construction period of two years and an operation period of 20 years. After the expiration of the operation period, it will be handed over to Wuhan Hi-Tech (holding the property rights of state-owned assets on behalf of the Municipal State-owned Assets Supervision and Administration Commission). However, after the completion of the first phase of the project, supporting pipe network construction, sewage charges and other issues. The factory was idle for a long time, and finally the whole factory was handed over to Wuhan Water Group.
Xi。 Risk of changes in market demand
It refers to the risk that the market demand changes due to other factors such as macro-economy, social environment, population change and adjustment of laws and regulations, which leads to the difference between the market forecast and the actual demand. For example, Shandong Zhonghua Power Generation Project, the project company was established in 1997, and it is planned to be finally completed in 2004. The operation was successful after the completion. However, the change of Shandong electricity market and the reform of domestic electricity system have great influence on the operation of power purchase agreement. The first is the electricity price. 1998 according to the memorandum of understanding signed by the former state planning commission, China was given a higher on-grid tariff of 0.4 1 yuan/kwh in the first and second power plants in Shi Heng; June 5438+October 2002 10, when the new unit of Heze Power Plant was put into production, the price approved by Shandong Provincial Price Bureau was 0.32 yuan/kWh. This electricity price cannot meet the normal operation of the project; Secondly, the "minimum electricity purchase" stipulated in the contract is also threatened. Since 2003, Shandong Provincial Planning Commission has reduced the minimum power purchase between China Power Generation and Shandong Electric Power Group from 5,500 hours to 5 100 hours. Due to the contract constraints, Shandong Electric Power Group still has to buy 5,500 hours of electricity at the "planned electricity price", and the difference will be filled by Shandong Electric Power Group itself, which will undoubtedly dampen the enthusiasm of Shandong Electric Power Group for purchasing electricity. This risk also exists in Hangzhou Bay Bridge, the Fourth Minjiang River Bridge, citong bridge, Jingtong Expressway and other projects.
Twelve. Risk of cost change
It refers to the risk that the operating income of the project company is not as good as expected because the charging price of PPP products or services is too high or too low or the charging adjustment is not flexible or free. For example, due to the reform of power system and the change of market demand, the electricity price charge of Shandong Zhonghua Power Generation Project changed from 0.4 1 yuan/kwh at the beginning of the project to 0.32 yuan/kwh, which seriously threatened the income of the project company.
Thirteen. Corruption risk
It mainly means that government officials or representatives use illegal influence to ask for or demand illegal property, which directly leads to the increase of the cost of maintaining the relationship between the project company and the risk of future government default. For example, the BOT project of Shenyang No.9 Water Plant invested and constructed by Hong Kong Huijin Company, the agreed return on investment is: 65,438+08.50% in the second to fourth years; 5- 14 years, 21%; 15-20 years, 1 1%. With such a high rate of return, the water price paid by Shenyang Water Supply Corporation to the Ninth Waterworks is 2.50 yuan/ton, while the average water supply price in Shenyang is 1.40 yuan/ton. By 2000, the loss of Shenyang Water Supply Corporation was as high as 200 million yuan. This loss should have been covered by the government finance, but Shenyang has not given financial subsidies to the water supply company for many years. Shenyang Water Supply Company requested to change the contract. After several rounds of hard negotiations, at the end of 2000, the two parties changed the contract to: Shenyang Water Supply Corporation repurchased 50% equity of Huijin Company in the Ninth Waterworks, and the return on investment also dropped to 14%. After this change, Shenyang Waterworks can pay less than 200 million yuan in the future. In fact, the high rate of return promised to foreign investors is largely related to the corruption of local officials. In the industry, eight water plants invested and built by foreign investors in Shenyang are called "Shenyang Water Shady".